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Is it possible to live the dream with your current income? The ‘dream fund’ will let you.

Written by - Chitra Grace Marion

August 31, 2017 4 minutes

Imagine living in a world where all your financial obligations and requirements are taken care of.

  • Monthly expenses – provided for
  • Lifestyle expenses – paid for
  • Children’s education – invested in
  • Annual holidays – paid for

Whatever financial wants there would be, you wouldn’t have a care because each want would already be taken care of. Would you want to earn?

I wouldn’t. Why bother? In this Utopian reality where everything is already provided for, I can just sit and relax. Wouldn’t it be wonderful?

Every individual wants to break free from the situation where money is always in short supply. Everyone wants to achieve financial freedom. Financial freedom is nothing but a manifestation of the above-mentioned Utopian imagination. It is a situation where you are assured of a corpus which would take care of all your financial obligations, even in a crisis. How many of you can boast of being financially free?

I can’t. When I think of financial freedom, a lot of financial responsibilities present themselves in front of me. To become financially free I need to have a dream fund, a fund which pays sufficient returns every year which takes care of all my expenses and obligations. With this fund I am assured that a financial contingency would never strike me. Do you have this dream fund?

Many of you, like me, would not. But, wouldn’t you want to build this dream fund for financial independence? I did. I built my dream fund and can, today, say that I have all my finances taken care of. Now, it’s your turn.

Building a dream fund which gives you financial freedom is not difficult. You just have to adopt some practices and start investing towards your dream fund. Here are some things which I did and which you should do too:

  • Goal-based investments

The first step is to start investing. Investments are necessary to create a corpus. When investing, you should be aware of your financial goals. Your child’s future education, taking a foreign vacation, buying a home, building a retirement corpus – you should assess your goals and then invest towards them. Goal-based investment is necessary as it gives you freedom from your financial obligations. This is the first step towards your dream fund which would have provisions for your financial responsibilities and free you from them.

For goal-based investments, first, chalk out your goals. 10 years ago I did the same. I prioritized my goals which were – building an education fund for my children, taking a foreign trip every year and creating a retirement corpus. Then I started investing towards my goals. I earmarked my investment towards each goal and contributed towards each.

Another facet of goal-based investment is earmarking of goals which I did and which is important. You should have specific investments meant for specific goals. Do not invest blindly. Earmarking helps free you from your financial responsibilities. For instance, my vacation fund now ensures that I take an annual vacation every year without worry. Financial independence, isn’t it?

  • Disciplined investments

Your dream fund would never be complete or sufficient until you continue contributing towards it. Rome was not built in a day and neither can your dream fund be. You need to keep investing in the fund so that it becomes sufficient enough for your financial needs. Experts, therefore, stress the need of being a disciplined investor. You should invest every month, quarter, half-year or year, as per your suitability, without fail. I invested every month for about 15 years when I was able to create my dream fund.

  • Asset allocation

Having a lopsided financial portfolio is never wise if you are to maximize your investment returns. While equity exposure gives you very high returns, you cannot ignore the high risk which is associated with it. Debt instruments or deposits, on the other hand, are not risky but their returns are very low. Real estate, though yielding good returns, has a problem with liquidity. Therefore, asset allocation is essential. Asset allocation lets you invest in a mix of assets based on your risk profile. Thus, you get the benefit of portfolio diversification. This diversification maximizes returns while at the same time reducing the inherent investment risk.

As mentioned earlier, for financial freedom you need a dream fund which is not very hard to build. All you need are some tips up your sleeve which I have already outlined above. I was able to achieve financial freedom with these tips. My Utopian imagination has become real. What about you?

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